Gold prices continued to hit historic highs Wednesday, approaching $1,240 an ounce after closing at a record high Tuesday.

The yellow metal is hitting new peaks as investors grow worrisome over the European debt crisis and the $1 trillion rescue package meant to help Greece and other debt-plagued economies. Gold futures are seeing similar action, with the June contract closing Tuesday at $1,220.30, an all-time high. Gold stocks and exchange-traded funds (ETFs) also surged on the news.

And for good reason. The European debt crisis is serious. The table below puts it into perspective:

Country

External Debt-to-GDP

Italy

147.4%

Greece

170.5%

Spain

186.1%

Portugal

235.9%

Ireland

1,312.0%

*According to World Bank data

External debt-to-GDP gives a picture of how much debt (government, corporate and individual) must be paid by a country to its creditors. There are other factors involved in what's going on in Europe, but this gives you an idea of the severity of the situation. (For the record, U.S. external debt-to-GDP stands at 96.5%).

Gold has been up for several days running, including a run after Monday's massive 400-point rally in stocks on news of the aid package. The precious metal is up +12.4% year-to-date, following its +24.4% surge in 2009.

With debt contagion spreading and the future of the euro looking uncertain, gold's run is likely to continue.

One reason is because central banks the world over are selling euro reserves. They're not convinced of the stability of the euro, and just when the U.S. Federal Reserve announced its rescue package, they bought gold. In fact, some are even heralding the arrival of gold, not the euro, as the world's second reserve currency.

Another reason is inflation. It's coming. It's what happens when the global economy recovers, particularly when countries have to spend their way to recovery and growth, as we've seen not only in this episode, but for the past couple of years.

But in order to really understand what's going on with gold, we need to take a step back.

The latest news isn't a surprise to followers of the "safe haven" asset: gold has been in a steady bull market for quite some time now. In fact, gold has also been the best-performing asset class during the past decade.

There are several ways to play gold, including buying the actual metal, but there are two in particular that stand out right now:

Goldcorp (GG) is a Canadian gold miner that owns and operates mines in Canada, the United States, Mexico and Central and South America. Nathan Slaughter, editor of StreetAuthority's Market Advisor newsletter, calls it "The single best gold play the market has to offer." It's not hard to see why. Whether prices are at $800 an ounce or $1,800 an ounce, Goldcorp still makes money. It has the lowest production costs in the industry and can still turn a sizeable profit if prices tumble (which isn't likely). If prices continue rising, operating leverage should cause the bottom line to grow much faster than the gold spot price and juice returns for investors.

For investors seeking a diversified play, Market Vectors Gold Miners ETF (GDX) is a viable option. GDX is an ETF that holds a basket of gold miners like Barrick Gold (ABX), Goldcorp,Newmont Mining (NEM) and AngloGold (AU). Owning a single gold miner can sometimes be risky, but GDX's diverse portfolio will still give investors a pop when gold rises.

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